How I Got Into a Mountain of Consumer Debt

I made the last payment on consumer debt last April, just before deciding to buy a condo. Or was it June? I know when I met Brent, I still had $400 left on my car loan, which I was having a hard time paying off, not because I didn’t have the money in my bank account, but because I didn’t know what to do once I’d paid it off.

But that’s the end of the story, isn’t it? What to do when you’ve paid it all off?

Let’s travel back in time, shall we? To see how this story begins.

February 15, 2005

I packed everything I could into four giant boxes, and flew out with my boyfriend at the time to a place I’d never been before: Washington, DC. I found a room in a house in “Alexandria” which was so far from DC that it took me more than two hours commuting (yes, Google maps existed in 2005; no, I wasn’t smart enough to use it, thanks for asking). Later, I learned that you can call everything in Alexandria county Alexandria, and while yes, the cute little town where George Washington did a lot of business is in fact just across the river from DC, the house I ended up at was just across the street from a WalMart. That was not what I signed up for.

So I called my mom, and asked if she might help me with a first and last month’s deposit on a gorgeous, tiny, “junior one bedroom” apartment for roughly half of my take-home salary each month. But it was in the right location, and it was in a building that used to be the Chilean Embassy (I suppose, before Chile got a little more money and they could afford a slightly bigger building!). The fuse boxes were in Spanish! I had a marble fireplace (and a dorm-sized fridge)! I was in heaven.

I was also in debt. At that time, I was in debt to my mom, and struggling to make my salary plus my expensive home work without taking on anything extra (side hustling had not occurred to me at that point — who had time for stuff like that?).

March 2006

I stayed almost exactly one year at the job I was offered when I first moved out to DC, and resigned without a next step in March. I came home for a few weeks. Went on a road trip with my best friend. Generally contemplated my next move. I thought I hadn’t given DC enough of a shot, so I went back. My boyfriend at the time found us a place to live rent free on the metro line (closer than I’d found when I first moved there!) so there wasn’t much pressure to find just any old job. The funny thing about DC, too, is how many jobs there were at the time. I don’t know if it’s the case anymore (I would guess that it is) but entry level work was plentiful and well compensated.

June 2006

After living for a time without paying rent, I had nearly paid off my credit card, though it wasn’t even close to a priority, so I honestly couldn’t tell you how close I came. But it didn’t matter. A friend of my boyfriend at the time was in legal troubles, and he came to us with a plan that sounded too good to be true. He needed his intellectual property back, for a rat poison or something that wasn’t harmful to humans, but it was super deadly to rodents. As I type this, I’m filled with skepticism, and probably was at the time, but he told us if we paid him $40,000 that we would not only see our money back in six months, but in two years, we’d have millions.

So I did the stupidest thing you could possibly do with my credit card. I wrote a check, effectively maxing out my credit card, to this man I’d never met before and had only heard about second hand. I asked my credit union for a $5,000 loan, paid $2,000 in cash, and (oh, dear) wrote a check for $12,000 on those “convenience” checks the credit card companies so generously send every month.

I had shot myself in the foot, but I was confident. I was the kind of confident you can be when you’re in your mid twenties and you still know everything. I was working, but I wasn’t prioritizing that credit card debt. Who needed to? I was going to get that back, and then some!

It took about a year for me to come to terms with the fact that I was never going to see that money again. Not ever.

Here’s a lesson for you: never write a check from anything other than a checking account. Don’t make that mistake. It took me years of paying over 20% interest to learn that lesson. But I learned it. Every time I made a payment, I learned it.

2007-2008

I lived blissfully unaware of my financial situation. The people who say ignorance is bliss were talking about me, sitting in a park, reading a book, when my debt was silently piling up around me. I’m sure most of my payment in any given month went straight to interest. I had a thought that it was bad when I needed to get a different credit card for spending, because there wasn’t enough “room” on the credit card with the giant debt.

That’s a good solution, past-Kathleen. MORE debt.

I was hustling in 2008. I had two jobs — one at an association, and one at a restaurant. I was bringing in decent money! I was also paying rent again, because the rent-free situation only lasted two years. Now, if I had the opportunity to live rent free, I would do something different with the money I was saving. I mean, I’d actually save it or something. But I didn’t.

I moved back to Portland in November 2008, and started a job in hospitality recruiting. Because I’m good at timing. Do you know what people don’t need at the peak of the recession? Fancy schmancy recruiters. When nobody is hiring, there’s no need for a recruiter. So I was laid off within months of starting.

2009

I look back on 2009 today with mixed feelings. On the one hand, I couldn’t find work anywhere. Nobody could. I submitted approximately 93 bajillion resumes, only to hear back from a handful. One was 100% commission and I had to buy my own equipment. I sold a few things, but I know that job cost me more than I earned from it. I found a job that was great but only 15 hours a week. I took it. I needed to! That ended up being a good idea, since I stayed there four years, convincing them along the way that I was worth having full time.

On the other hand, it was the time of my life. I was living with my recently single again best friend and her toddler, part time. Half the week we were out dancing, and half the week we were playing trains in our apartment. We went to concerts and generally had an amazing time. We still call that summer the summer of Ashley.

2011

In November 2011, I turned 30. At the beginning of the year, I thought, wow I need to get myself together. I do not want to be in credit card debt by the time I’m 30! I prioritized the debt, but still couldn’t get ahead until one day, I came clean to my mom. She was appalled, and immediately agreed to sign up for a 0% interest balance transfer situation. It was a sweetheart of a deal: 24 months at 0% interest for a small (I think $700?) balance transfer fee. I had $8,000 remaining, and now, it looked like I was going to be able to pay it off.

I started reading personal finance blogs toward the end of 2011, and their income reports were ridiculous. Some people were making $30,000 a month! It wasn’t because their stories were amazing, it was because the SEO experts figured out a loophole in the Google algorithm, to the benefit of all personal finance bloggers everywhere. I wanted in. And just like you should never invest in a stock once CSPAN says it’s a good idea, by the time I got up and running, Google “fixed the glitch” in the algorithm, and I never got to see $30,000 a month. I’d still like to!

But I found something much more powerful: a community. Frugal Portland became my platform for talking about all the crazy tricks and delayed gratification tactics I was implementing to get myself in a better place financially. I took the advice of friendly voices in the computer. Over time, those voices became actual friends. I saw them at conferences. They live all over the country (and the one to the north), but they live in my computer as well.

2014

Now I’m out of debt. I’m so much out of debt, I’m right back into it. Only this time, it’s not consumer debt, and I don’t feel bad about it. In fact, I’m in the only kind of debt I could ultimately profit from, which is an odd feeling. I’m happy for the lessons I’ve learned along the way, but they were really tough lessons, and they really sucked to learn. I wish I’d gotten out of debt when it was at a reasonable level. I still have weird feelings about money. I feel like I make a lot less money than I do, and I have a really hard time spending money.

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I am currently working on getting myself out of an enormous student loan debt. I just recently paid off my last credit card (not on terms that I like). I wish I would have known what I do now about debt.

Thanks for sharing your story, Kathleen. It feels like you’ve been debt free forever, but you really haven’t. You have come SO SO far in the time I’ve known you. What a crazy story you have about the rat poison, lol. That’s one for the books! I’m so glad you came back to Portland, started blogging, got out of debt, and now are a rockstar. :)

Oh, that ex’s friend situation is out of a nightmare! I love the balance transfer at 0% though. Can be a really good tool if utilized correctly. Yay for community…even if it doesn’t make us 30k a month! (I started around the same time. :p)

Oh, this story reminds me of my bad ways when I was in my 20’s and racked up a ton of credit card debt! All for reasons that today seem so silly. Thankfully, I learned my lesson about credit cards, now I just have to work my way out of student loan debt. ;)